NEW YORK, Nov 20 (Reuters) - Wall Street halted its two-day
rally on Tuesday, after Federal Reserve Chairman Ben Bernanke
said the central bank lacks tools to cushion the U.S. economy
from the impact of the "fiscal cliff."

The day's biggest disappointment was Hewlett-Packard Co
shares, which sank to a 10-year low after the computer
and printer maker swung to a fourth-quarter loss and announced a
$5 billion charge related to "accounting improprieties." The
stock slid 12 percent to close at $11.71.

Bernanke, in comments before the Economic Club of New York,
said the Fed does not have the ability to offset the damage that
would result if politicians fail to strike a deal to prevent a
series of mandatory tax increases and spending cuts scheduled to
go into effect early next year.

The statement caused a downdraft in the market, though the
equity market cut most of its losses before the end of the day.

"This is a more realistic and pragmatic picture of where we
are, compared to what we've been hearing for the past couple of
days from politicians that are mostly PR stunts," said James
Dailey, portfolio manager at TEAM Asset Strategy Fund in
Harrisburg, Pennsylvania.

Stocks had rallied for the last two sessions after
Washington politicians sounded an encouraging note that a deal
to avoid the U.S. fiscal cliff could be reached. The gains
followed two weeks of sharp losses that pushed the S&P 500 down
through the 200-day moving average, a key benchmark of the
market's long-term trend.

The S&P ended Tuesday near that level, which was 1,382.68.

The Dow Jones industrial average slipped 7.45 points,
or 0.06 percent, to 12,788.51 at the close. But the Standard &
Poor's 500 Index edged up 0.93 of a point, or 0.07
percent, to finish at 1,387.82. The Nasdaq Composite Index
inched up 0.61 of a point, or 0.02 percent, to close at
2,916.68.

Dow component HP said it took an $8.8 billion charge in the
quarter, with $5 billion related to its acquisition of software
firm Autonomy, citing "serious accounting improprieties." HP's
market value is now just $23 billion, compared with $100 billion
just two years ago.

Best Buy Co shares fell 13 percent to $11.96 after
the consumer electronics retailer reported a net loss of $13
million for the third quarter on weaker-than-expected sales at
its established stores.

Another factor weighing on stocks was Moody's Investors
Service's reduction of France's sovereign rating by one notch to
Aa1 after the market's close on Monday. Moody's cited an
uncertain fiscal outlook as a result of the weakening economy.

"This brings forward a whole new set of problems to the euro
-zone issue. When the lifeguards, in this case, Germany and
France, are in trouble, when they need to save people like
Greece and Spain, that could be a big concern," Dailey said.

Earlier, data showed U.S. housing starts rose to their
highest rate in more than four years in October, suggesting the
housing market recovery was picking up momentum, even though
permits for future construction fell.

An index of housing-related shares shot up 2.5
percent.

Volume was roughly 5.6 billion shares on the New York Stock
Exchange, the Nasdaq and the NYSE MKT, compared with the
year-to-date average daily closing volume of around 6.5 billion.

Advancers outnumbers decliners on the NYSE by a ratio of
about 4 to 3. On Nasdaq, the opposite trend took hold, with
about 13 stocks falling for every 12 that rose.